Residential Sales Contract

Residential Sales Contract

A real estate sales contract indicates a seller’s agreement to exchange a property with a buyer usually in exchange for money. A residential sales contract conveys a seller’s legal agreement to exchange a residential property with a buyer. A residential sales contract can also be considered as an offer for which the seller has agreed on a specific price for their property. This offer will become a legally binding contract after the buyer verbally accepts the offer and then both the seller and buyer indicate their acceptance through written signatures on the residential sales contract.

Contract Contingencies

Many real estate sales contracts may also have a contingency clause, which provides a condition that must be met in order for the transaction to succeed. If the condition of the contingency clause is not met, then the buyer can legally terminate their acceptance and invalidate the sales contract. For instance, a mortgage contingency or financing contingency hinges the legitimacy of the contract on the buyer’s ability to obtain adequate contractual financing. If a buyer plans to purchase a home for $150,000 and pays a down payment of $20,000 with the intention to pay the remaining amount through a mortgage, a mortgage contingency would protect the buyer in the event that the bank rejects to provide the buyer a mortgage loan. Unfortunately, the mortgage contingency will only save the buyer from the obligation to purchase the remaining cost of the house but it will not reimburse the previous down payment costs.

An inspection contingency protects the buyer from entering into an agreement with a house with unforeseen problems. As per the conditions of an inspector contingency, a home inspector will typically examine the house for pest infestations, electrical issues, heating and air conditioning problems, soil instability, water damage, plumbing issues or gas leaks. If the home inspector finds any of these issues, then the purchasers can legally exit their prior agreement. In some case, if the home inspector only finds minor problems or issues that can be easily fixed, then the purchasers may continue to proceed with the sales contract agreement.

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